The Australian Dollar (AUD) outperforms its major peers on Thursday, buoyed by hawkish Reserve Bank of Australia (RBA) expectations after Australian inflation data released on Wednesday surprised to the upside.
A softer US Dollar (USD) provides additional support
At the time of writing, AUD/USD trades around 0.7197, at levels last seen in mid-May. The stronger-than-expected inflation figures have reinforced expectations that the RBA could raise interest rates as soon as September. The central bank left the cash rate unchanged at 4.35% at its August meeting after three increases earlier this year, but warned that inflation is likely to stay elevated for some time and that risks to the inflation outlook remain tilted to the upside, particularly due to higher Oil prices amid tensions in the Middle East.
Reuters reported on Thursday that three of Australia’s four major banks now expect another RBA rate hike this year. NAB forecasts a 25-basis-point (bps) increase in September, while Commonwealth Bank and ANZ expect the next move in November. Westpac, meanwhile, expects rates to remain unchanged.